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Case Digest on EVANGELISTA, ET AL V. SANTOS

November 11, 2010

Case Digest on EVANGELISTA, ET AL V. SANTOS

Facts:   Plaintiffs, minority stockholders of Vitali Lumber Company, alleges in their complaint that defendant as president, manager and treasurer of their company, through fault, neglect and abandonment allowed it lumber concession to lapse and its properties and assets to disappear causing the complete ruin of the corporation’s operation and total depreciation of its stocks.

They pray for an accounting from the defendant of the corporate affairs and assets, payment to them of the value of their respective participation in said assets on the basis of the value of the stocks held by each of them and to pay the cost of the suit.

Ruling:            In derivative suits, the injury complained of must be one which is against the corporation, thus the action properly belongs to the corporation rather than the stockholders. The suit is brought by the individual stockholder as the nominal party plaintiff for the benefit of the corporation which is the real party in interest.

In the case at bar, however, plaintiff stockholders brought the action not for the benefit of the corporation but for their own benefit since they ask that the defendant make good losses occasioned by his mismanagement and to pay them the value of their respective participation in the corporate assets on the basis of their respective holdings.

Petition dismissed for venue being improperly laid.

Class notes: In effect what the stockholders petitioning for, in this case, was a distribution of corporate assets before liquidation which is not allowed. Their remedy is to amend the complaint and bring it to the proper venue.

Derivative suits may be brought by: (a) a minority stockholder, (b) a corporate officer, (c) a treasurer, (d) a director, or (e) a majority stockholder when requirement of 2/3 affirmative vote is necessary.

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